The attention of policy makers has been focused on the science of how viruses either spread or are contained in social networks.
Just as crucial in the current circumstances is the spread of beliefs and behaviour. Will people continue to observe social distancing once the lockdown is eased, or will they revert to pre-lockdown patterns of behaviour?
For all their sophistication, epidemic models are a product of 20th century science. Understanding how patterns of behaviour evolve requires the 21st century science of network theory.
Much remains to be discovered in this innovative scientific field. But much is already known.
For example, a recent major study in the top journal Science established that fake news seems to have more novelty and attraction than real news. Fake news tweets typically show a much higher level of emotion in their overall content.
A piece of fake news is not certain to spread and be believed. Most stories just fade away. But fakes have a better chance than true of getting traction.
A recent example is the idea that coronavirus is spread by 5G technology. Fortunately, belief in this seems to have been contained to a relatively small group. But 5G phone masts continue to be attacked.
We now have much more evidence. Across the West, well over 90 per cent of deaths from the virus are of people with an underlying health condition. A fit 70 year old is at far less risk of death than a grossly obese 35 year old.
If a substantial proportion of the 9 million over 70s were to believe they were the target of Remainer Revenge, the police would be totally powerless in the face of widespread disobedience.
The police themselves understand this only too well. In essence, the phrase “policing by consent” means that the vast majority of people have to hold the belief that the police can be trusted to act reasonably.
Their fear is that this could easily crumble. One idea being floated is that family “bubbles” would be created for social mixing. The former Chief Constable of Greater Manchester made it clear over the weekend that the police would basically not want to be involved in its enforcement.
These are just a few examples of the importance of network science, a discipline which involves mathematicians, computer scientists and social scientists. This must become a key part of “the science” on which the government relies.
As published in City AM Wednesday 30th April 2020
Image by Omni Matryx from Pixabay
The praise for health workers dealing with Covid-19 is universal. From cleaners and porters to the most distinguished consultant, all have played their part.
But they are working in an administrative system almost Kafka-esque in its lunacy.
An early example was when NHS workers turned up to be tested at the huge PHE complex at Chessington. The staff were all there, with no-one to test. But the health workers were turned away. They did not have a letter of appointment.
I can echo this from my own experience. I had minor surgery to my hand at the start of last month.
Every single person I dealt with in the NHS was friendly and efficient. But the administrative process was grossly inefficient.
First, I had to see my GP to see if the operation should be done. Fair enough. He had to write a letter to the consultant saying so.
I received a letter from the hospital to see the consultant, who confirmed an operation was needed. I was sent another letter for a pre-operation check.
After this, a letter came with the date for the operation. I had told the hospital I would be in Australia all of February. It arrived mid-February.
Fortunately, my wife was following on the very next day and brought it. The letter told me to phone the hospital to confirm the date and also to sign and return yet another letter saying the same thing. There was an email address. I copied out the wording of the return letter, signed it and emailed it.
I phoned and explained I was in Australia. I had sent an email, would this do? No, I had to return the letter. Why? The woman was honest. She did not know, but that was the rule.
The minor operation was duly performed. The consultant saw me while I was waiting to leave. I would need to fix a follow up appointment. Could I do it now? Well, you have surely guessed: no, I would be sent a letter.
Almost all the mail people get these days is junk. Most serious communication is by email. But the 20th century technology of letters is deeply embedded in the NHS administrative system. At least they have moved on from semaphore.
It is only last year that Matt Hancock, the Health Secretary, had to instruct the NHS to stop purchasing fax machines. It was the largest single buyer of them in the entire world. Few people under 30 even know what they are.
The system appears unable even to provide accurate information on the daily number of deaths and new infections. The Centre for Evidence Based Medicine at Oxford goes through the records meticulously. Quite a number of deaths announced in mid-April actually happened in March. The Centre believes peak death rate was reached on 8 April.
It is no wonder that the task of providing a suitable amount of protective equipment seems insurmountable. The bureaucracies of both the NHS and PHE are not fit for purpose.
As published in City AM Wednesday 22nd April 2020
Image: NHS Hospital by Francis Tyers via Wikipedia is licensed for use CC BY-SA 3.0
Lockdowns are starting to be eased in Europe. Austria, Denmark, Italy and Spain are all moving back towards normality. At some point during May, the UK will follow.
We can reflect on what the government has got right and wrong so far in the opening phase of the pandemic.
This is emphatically not to apportion blame. The government was suddenly confronted with a crisis without parallel in living memory. Mistakes were bound to be made. The key question is how rapidly the appropriate lessons were drawn.
East Asian countries responded to the crisis far better than the UK and Europe. But they had the opportunity to learn from the earlier SARS virus, which did not spread to the West.
Government departments did try and prepare by “game playing” a pandemic. Exercise Cygnus in late 2014, for example, seems to have formed the basis for the initial response to the real thing.
But no matter how much governments attempt to develop strategies in advance, in the words of the great Prussian general of the 19th century, von Moltke, “no plan survives initial contact with the enemy”.
At first, the policy was to let the virus spread so that the population could develop so-called herd immunity. This was a serious mistake. Even the most basic epidemiological model would predict a huge spike in cases with a virus such as Covid.
The government learned rapidly. A voluntary lockdown was proposed, to which many people responded.
The actions of a minority prompted the introduction of a legal basis for the lockdown. This was completely correct. We can already see sharp falls in reported new cases in countries such as Italy which introduced lockdown before us.
Another notable success has been what we could term the propaganda strategy. The slogan “Stay home, protect the NHS, save lives” is brilliant. It has been so effective at changing behaviour that some may be reluctant to leave lockdown even when it is lifted legally.
The government still seems to rely heavily on a single team for its epidemiological modelling. They have not learned that this is not a science with the precision of physics. Different teams have quite different views.
Even the projections of the same team can change rapidly. For example, The Institute for Health Metrics and Evaluation is a prestigious American academic outfit. Just over a week ago, they predicted 66,000 deaths in the UK. This is now revised down to 37,000. Were it not blasphemous, we might speculate that their next forecast might be one of negative deaths, with thousands rising from the grave.
Further, epidemiologists focus on the disease in question, how it might evolve, how to contain it, to the exclusion of everything else.
Economics brings a wider perspective. The common perception is that the subject is about macro – the big things like GDP and unemployment.
But the main focus of economics is on individuals, how they take decisions, and how these decisions can be influenced. Economists have a key role to play in any exit strategy.
As published in City AM Wednesday 15th April 2020
Image: City of London by Ian Capper via Geograph is licensed for use CC BY-SA 2.0
The strategy of exiting from the lockdown is far too important to be left in the hands of health professionals.
The government’s advisors have played very valuable roles in helping to avert the sort of crisis which overwhelmed the health services in Northern Italy.
Many who were seriously ill with the virus died unnecessarily because of a lack of ventilators. People with other dangerous conditions died because resources were diverted to virus patients. Britain, from an admittedly standing start, has learnt from those mistakes.
But there is growing realisation of the huge costs being incurred economically. A consensus is emerging amongst economists that the British economy has shrunk by about 30 per cent. In money terms, this is a loss of over £2 billion a day.
The costs are not just monetary. Stories of increases in domestic abuse proliferate. Worries about general mental health are growing, with the former Governor of the Bank of England, Mervyn King, adding his voice to them last week.
From a purely health perspective, the lockdown might persist until there is no longer a risk of someone with the virus infecting anyone else and so ensuring that no one dies.
We could take a similar view with road traffic. We could save almost 2,000 lives a year and avoid some 25,000 serious injuries by abolishing motor vehicles.
As a society, we are willing to make the trade-off. We accept this level of death and injury in return for the benefits which road traffic creates.
Obviously, governments take measures to try and reduce these accidents. In the late 1960s there were nearly 8,000 deaths a year. But we are happy for cars and lorries to continue to trundle around.
The virus imposes health costs. It takes up resources. People die and some survivors have long term damage. Getting the economy back to speed brings large benefits.
This is why I devised with Gerard Lyons of Net Wealth, and chief economist to Boris Johnson when he has Mayor of London, a traffic light strategy for getting Britain back to business.
The epidemiologists warn that loosening the lockdown will lead to another large wave of cases.
If behaviour reverts to what it was before the crisis, they are correct.
But behaviour will change. How many people will shake hands as soon as the lockdown is lifted?
This means that the chances of a disastrous second wave in which the NHS is overwhelmed are very much lower than the epidemic models suggest.
We suggest that lockdown is followed by three phases, as in a traffic light, from red to amber to green. Then everyone is clear about the sense of direction. At each stage different economic activities and behaviours are allowed. It will also give hope.
In the red phase, for example, more shops could open such as hairdressers, with social distancing and face masks. In the amber, unlimited private car travel. Only in the green phase could mass gatherings such as football crowds be allowed.
Combining epidemiology with economics is the way to get Britain back to work.
As published in City AM Wednesday 8th April 2020
Image: Empty Streets via Flickr is licensed for use CC BY 2.0
How long should the lockdown last? Should it be tightened or relaxed? An abstract concept from both epidemiology and network theory can give a powerful insight into these highly practical problems.
This is the concept known as the “threshold”, sometimes called the critical point or the tipping point.
The basic idea is a very familiar one. Imagine you take a cube of ice out of the freezer. It will be ice regardless of whether the temperature is set at minus 10 or minus 2 degrees. Changing the starting temperature makes no difference.
But as soon as the temperature is above zero, it starts to turn to water. A threshold has been passed. You put the water in a pan and heat it up. It stays as water until it gets to another threshold — boiling point — when it changes into steam.
Close to thresholds, small changes can make massive differences.
The maths of epidemic models tells us that as soon as the degree of social distancing is sufficiently high, the number of true new cases of any virus begins to drop immediately.
In other words, there is a threshold in terms of the amount of social distancing in a society. Below this critical level, more distancing has little impact on the spread of the virus. Above it, being more rigorous and having more restrictions yield diminishing returns.
The essential thing is to get above the threshold.
Last week, a group at Sydney University published a study which modelled the spread of Covid-19 across all 24m inhabitants of Australia, linking epidemiological models with detailed census data. In terms of social distancing, they found a powerful threshold effect.
Suppose zero represents the usual world in which there is no social distancing at all. At the other end of the scale, 100 is absolute and total lockdown — something that not even the Chinese police state could enforce.
The Sydney team argued that the threshold for coronavirus was around 70. Moving, say, from 40 to 60 did very little to check the virus; moving from 80 to 90 controlled the spread a bit better. But the key thing was to get above 70.
In the UK, we seem to be well above the threshold. Before social distancing measures came in, epidemiologists were predicting at least 250,000 deaths in the UK from the virus. The various experts are properly cautious, but there is now every hope that the eventual toll will be 25,000 or fewer.
What does this mean in practice? Anyone who is now working from home and follows government guidelines has probably on average increased his or her social distancing from zero to at least 90. A minority of people still have to work, but even then their social interactions have been curbed substantially. Overall, as a society we seem to be well above the threshold at which social distancing works.
There is therefore no need to hand more powers to police forces, some of whom are already seeking to emulate the Stasi. Mid to late April will be the time for fewer, not more, restrictions.
As published in City AM Wednesday 1st April 2020
Image: Social Distancing by GoToVan via Wikipedia is licensed for use CC BY 2.0
The current crisis dominates everything, from trade to everyday life. But, within a relatively short space of time, it will pass. What next? What will be the “new normal” after coronavirus?
A key policy aim across the west for many decades since the Second World War was to reduce barriers to international trade. But it seems likely that the crisis will reverse this longstanding trend. There were already signs of it slowing down.
President Trump is trading accusations with China on who is to blame for the coronavirus pandemic. Of course, this mood can swing.
But an important new phrase in US government circles is “decoupling”. American supply chains have become increasingly dependent on China in the past 20 years or so. The talk is of breaking this dependence, probably by using new trade barriers.
Within the EU, national governments have reasserted domestic sovereignty in a dramatic way. The authority of the European Commission has been reduced, and it will not be easy to restore it.
The instinct of economists is to recoil in horror whenever they are confronted with the idea of barriers to trade. These are regarded as being unequivocally a Bad Thing. But their own discipline shows that matters are not necessarily so clear-cut.
Over 60 years ago, the theoretical journal the Review of Economic Studies — then as now a desired outlet for academic economists — published a paper entitled “The general theory of second best”.
Richard Lipsey, one of the authors, went on to write a best-selling textbook. The other, sadly dead now, was Kelvin Lancaster. He was a highly original thinker who in the opinion of many should have been given the Nobel Prize.
The paper is set in the highly abstract context of what economists call general equilibrium. Everyone behaves exactly in accord with economic theory. Supply and demand balance in every market, so there is no unemployment, for example. It represents the theoretical ideal of the efficient allocation of resources.
If there were only one barrier to such a perfect state of affairs, getting rid of it would lead to a better outcome. Lipsey and Lancaster asked the simple question: if there were more than one, what can we say if just one of these is eliminated?
Their answer was quite devastating — so much so that economists who encounter this famous article as students look it firmly in the eye and then try and forget it.
They showed that there was no theoretical presumption that the economy would be more efficient if an imperfection were removed but others still remained.
In the real world, there are of course many deviations from this abstract, perfect world. This means that there is no presumption in economic theory that bringing in some restrictions on trade will make things worse. It is an empirical and not a theoretical issue.
Just like the UK leaving the EU, what really matters is the domestic response to changes in the external environment. A bit more protectionism across the globe could stimulate a new wave of innovation in the west, as we look to rely on ourselves rather than China.
As published in City AM Wednesday 25 March 2020
Image: Cargo ship via Pxfuel is licensed for free use.
John Maynard Keynes could certainly craft a neat phrase.
In the Second World War, he wrote in his pamphlet How to Pay for the War: “It is only in a free community that the task of government is complicated by the cause of social justice.”
The impact of the coronavirus pandemic is similar to a war. Governments have to spend more on some stuff (bombers or ventilators) and restrict access to resources for other activities (in WW2, petrol was rationed, now sports events restricted).
In the current crisis, many otherwise viable companies will go to the wall as demand for their products and services drop. Already, the airlines are clamouring for a huge bailout.
Rishi Sunak’s loan scheme is a very good start, but it does not go far enough.
Looming over all of this: how should all the extra spending, extending even further than the loan scheme, be paid for?
Another great British economist, David Ricardo, was also fascinated by the question of how to pay for a major war. In his case, it was the Napoleonic wars in the early nineteenth century.
The government could either raise taxes or issue bonds to cover the increase in spending.
Ricardo argued that the effect on the economy would be the same regardless of which method was used. If increased government spending was financed by taxation, total demand in the economy would be unaffected. Military spending would rise, but private spending would fall.
According to Ricardo, the issue of government bonds would also have no effect. The bonds give rise to a stream of interest payments in the future and at some stage have to be repaid. So taxes in the future would be higher. A rational agent would anticipate these higher taxes. They would increase savings now in order to be able to meet them.
This concept, known as Ricardian equivalence, is hotly contested in macroeconomics even today. If it is true, so-called Keynesian policies for more public spending and bigger deficits simply do not work.
In the financial crisis of the late 2000s, the public sector deficit rose. Both the household and the corporate sector increased their savings, rather than running them down to maintain spending levels. So Ricardian equivalence is not as far-fetched as it may seem.
Traditionally, wars have mainly been paid for by the government issuing debt. In the Napoleonic wars, Bank of England data shows that government debt as a percentage of GDP rose from 100 to 150. In the First World War, it went from 20 to 110, and in the Second, from 130 to 250.
A similar massive rise now might simply be offset by an increase in private sector savings. Demand would fall even further than it is doing.
Sunak’s proposal is to make loans to any business that wants them, large or small. But the repayment period needs to be longer, say 10 years. The company could pay these back as and when it chose. Otherwise, the outstanding loans would be converted into equity in the company.
The loans would therefore either be repaid or backed by an asset. The principles of sound finance would be maintained, and businesses would survive.
As published in City AM Wednesday 18th March 2020
Image: Rishi Sunak via Flickr is licensed for use CC By-ND 2.0
The various pronouncements on coronavirus are a source of puzzlement to many.
On the one hand there are lurid predictions of millions of cases and hundreds of thousands of deaths. On the other, while the actual numbers are growing, they seem tiny so far compared to the scale of the predictions.
Almost 100 years ago, two Scots, Anderson McKendrick and William Kermack, developed an apparently simple mathematical model to explain and predict the spread of viruses. This abstract model remains the basis of our modern understanding. It gives insights not just into the spread of diseases, but how things like fake news disseminate on the internet.
These economists proposed that people at any point in time are in one of three conceptual states.
The first defines those who are susceptible to any particular virus. For example, a certain type of person may be susceptible to rumours that Elvis Presley is alive. It is not clear yet who is susceptible to Covid-19. It seems to be affecting most demographic groups, but the World Health Organisation pondered last week that children might not be susceptible, for example.
The next category is those who are infected, which is straightforward enough. The final one is “recovered”. This could mean genuinely recovered, or actually dead — at any rate, no longer susceptible.
Kermack and McKendrick set up three non-linear differential equations to describe how a virus might spread. Their apparent simplicity disguises a fiendish complexity.
From the names of the categories, it is known as the SIR model — susceptible, infected, recovered.
A major uncertainty is whether to use this model or its SIS variant. Here, the final “S” also means susceptible. The SIS model means that people can get re-infected. The common cold is a good example.
The key part of the system is determining how many susceptibles any given infected person passes the disease onto before he or she recovers. In turn, this depends on how much the susceptibles and infected intermingle (hence the drastic quarantines in China and Italy), the probability of catching the virus from a single contact, and the length of time someone is infected.
Basically, a virus will spread if a sufferer infects on average more than one susceptible. The current number for Covid-19 seems to be between two and three.
Typically, solutions of the model start with a very small number of cases relative to the size of the population. Then, very quickly, these accelerate dramatically.
Imagine a city of one million. People are only infectious for one day and infect two susceptibles. Someone catches the disease. There are only 128 cases at the end of the first week. But in less than three weeks, everyone will have had it.
Modern versions of the model look more closely at how people intermingle in reality, and use big data to map infection patterns. This is the basis for the search for so-called “super spreaders”.
In practice, predicting the course of any particular virus is a challenge. My sympathies lie with those who have this task. But a 100-year-old mathematical model tells us that the very large numbers we read about could easily become reality.
As published in City AM Wednesday 11th March 2020
Image: Monitoring Passengers by China News Service via Wikimedia is licensed for use CC BY 3.0
The reverberations around the resignation of Sir Philip Rutnam, the top civil servant at the Home Office, continue.
Priti Patel, the home secretary, is receiving a barrage of abuse.
Labour’s John McDonnell has pronounced that he cannot see how Patel could carry on. He raised the possibility that she might be in some way “suspended”.
It seems to have slipped the shadow chancellor’s mind that he himself was keen to carry out a purge of economists in the Treasury and Bank of England if Labour had won the election. The officials which remained would have required “re-educating”.
But right now it doesn’t really matter what Labour thinks. The salient point about the criticism of Patel is that it is coming from the serried ranks of the metropolitan liberal elite. The Guardian newspaper has been in a total lather. The BBC’s coverage has hardly been impartial.
This group see Rutnam as one of their own: a professional expert, conscientiously going about his business. Naturally, they regard his actions as sound, carried out in the interests of the nation as a whole.
An important part of economic theory takes a completely different view of the motivations of bureaucrats. James Buchanan was awarded the Nobel Prize in 1986 for his work in developing what is called “public choice theory”.
Public choice economics rejects the idea that bureaucrats act in a disinterested, objective way. They are no less selfish than the rest of us. Their primary motivation is not to serve the public, it is to further the interests both of themselves as individuals and of the bureaucracy as a whole.
The Home Office itself provides many examples which support this view. When tasked by ministers with deporting those without correct documentation, the bureaucrats did not try to track down, say, Albanian drug dealers. Instead, they minimised effort to themselves, identifying people who had lived here for decades but whose paperwork was not quite in order. The result was the Windrush scandal.
Some 20 years ago, I was involved in a project on crime for Charles Clarke when he was home secretary under Tony Blair. I discovered an influential group in the Home Office who believed that the number of criminal offences actually carried out was more or less constant from year to year.
It may have appeared from the data that there had been a huge increase in crime since the Second World War. On the contrary (according to these officials), this merely reflected changes in the propensity to report crimes. The actual level of crime, they purported, was the same in 2000 as it had been in 1950.
I was impressed by the brilliance of this hypothesis. It meant that no bureaucrat could ever be criticised for failing to control crime.
Of course, the view that people always act purely in their own self-interest is rarely completely true. There will be a mix of motivations at play. But in clashes between politicians and the bureaucracy, it is essential for democracy that the former win.
As published in City AM Wednesday 4th March 2020
Image: Home Office by Steph Gray via Wikimedia is icensed for use CC BY-SA 2.0
At first sight, long-term swings in individual seats in Australian elections are a definite niche interest, one for the real trainspotter.
But during a visit to Sydney University’s Complex Systems Institute, I noticed a fascinating piece in The Australian newspaper.
The Australian Labor Party had a good result in the 2007 federal elections, and a relatively poor one in those of 2019. Nationally, there was a swing of seven per cent from Labor to the centre-right Coalition.
In eight constituencies in Queensland — equivalent to some 30 seats in the House of Commons — the average swing away from Labor was over 16 per cent. All were held by Labor in 2007. All were won by the Coalition in 2019.
They had one key thing in common: in each constituency, coal mining or commodity extraction was an important part of the local economy.
We see exactly the same phenomenon across the west as a whole. Substantial groups of voters are very reluctant to pay the price now for policies which might yield benefits in terms of the climate a decade or more into the future.
Two decades ago, long before climate change became a fashionable topic, lorry drivers brought the UK to a virtual standstill in a protest against rising fuel prices. Much more recently, President Emmanuel Macron saw the streets of French cities in flames. The initial trigger which led to the so-called “gilet jaunes” movement was also proposed fuel tax increases.
So how can changes be made on a sufficient scale to address climate change in the light of this lack of democratic consent?
The liberal left in various countries sets great store by so-called citizens assemblies. A small group of citizens, reflecting the socio-demographic characteristics of the population, is selected at random to solve a particular policy challenge. One, set up by parliament itself, has been meeting in Britain on the topic of climate change. The 110 assembly members are encouraged to consider the topic in depth.
The liberal hope is that, guided by experts, ordinary people will come up with policy recommendations congenial to them. But this is only half the story. To be more convincing, the assembly members need to be made to live for a year or so experiencing the consequences of the policies they devise.
Anyone can advocate, say, an immediate ban on petrol and diesel vehicles in the abstract. But if you have to give up your own car here and now, you may come to an entirely different conclusion about what should be done.
But there is a silver lining. In Australia, this year solar energy costs are falling below those of coal and gas for the first time. A decade ago, they were over five times more expensive. As a result, households are installing solar panels in huge numbers. In the deserts, companies are building massive solar farms.
Hair shirts imposed on electorates by central planners will not work, and will instead spark democratic discontent. Ingenuity and innovation create the opportunity for a solution arising out of free choice.